The government has been urged to seek a court ruling on whether building a three-storey house is a traditional right of indigenous villagers that is protected by the Basic Law.

The call came from public policy think tank Civic Exchange, which termed the practice "fundamentally unsustainable".

Civic Exchange yesterday published a second report on the policy - under which male villagers in the New Territories have the right to build a 700 sq ft house - after its first one in 2003.

The report's author, Mandy Lao Man-lei, said there was no basis for the claim by rural advisory body Heung Yee Kuk that the right was protected under the Basic Law's Article 40.

"While the small-house grant application refers to a 'right', the administration has publicly stated that the indigenous villager's right to a small house is not a statutory entitlement but an administrative measure because no legislation was ever passed on this," said Lao.

The report quoted a High Court case early last year, in which it said the judge was hampered by lack of evidence as to precisely what rights were traditionally exercised by indigenous villagers. In the case, an indigenous villager living in Australia challenged a rejection of his application for a small-house grant.

He admitted he would remain in Australia to receive statutory medical benefits while his mother would live in the village house.

The judge eventually sided with the government's decision, assuming that the policy requirements - in which one had to reside in the village - had to be part of the right.

"A clear interpretation of Article 40 by the appellate court would provide an authoritative interpretation of what the traditional rights are," the report said.

The think tank also said the right should not be extended to female villagers despite its discriminatory nature. "If the policy is wrong in principle … then extending it to women or other groups of people is not a solution," it said. Extension would only exacerbate the "fundamentally unsustainable" nature of the policy. Other recommendations included banning villagers from selling their small houses immediately after building them.

A Development Bureau spokeswoman said it recognised the need to review the policy and was open to suggestions.

This article appeared in the South China Morning Post print edition as Call for court to decide on villagers' right to houses